A tale of 2 chips: the Intel and Nvidia story, and what the future holds for the race to chip supremacy

The journey

In the summer of 1968, amidst the burgeoning tech landscape, Intel was born. Founded by industry pioneers Gordon Moore and Robert Noyce, the company’s mission was simple yet profound: to provide the emerging and quickly accelerating technology market with the essential building blocks it craved. As the world’s appetite for computers and electronic devices grew, Intel’s role as a semiconductor supplier became increasingly crucial. Intel’s initial customers were mainly manufacturers of calculators and other electronic devices. One of their earliest breakthroughs was the development of the Intel 4004, the world’s first commercially produced microprocessor, which was designed for a Japanese calculator company, Busicom. This innovation laid the foundation for Intel’s future success in the personal computer market. In all sense, Intel was a commercial pioneer in chip design and manufacturing.

NVIDIA on the other hand, was a newcomer and a relative juvenile in the industry. Founded in 1993 by Jensen Huang, Curtis Priem, and Chris Malachowsky, NVIDIA emerged as a trailblazer in the realm of computer graphics. Unlike Intel, which focused on general-purpose microprocessors, NVIDIA specialized in graphics processing units (GPUs), designed to handle the complex calculations required for rendering images and graphics. These products naturally found traction in the gaming market, particularly with the rise of 3D games, and here they reign…along with other big gaming chips players like AMD.

NVIDIA’s Crypto Windfall

The late 2010s witnessed a cryptocurrency frenzy, as investors scrambled to capitalize on the meteoric rise of Bitcoin and other digital assets. One popular method of acquiring cryptocurrencies was mining, a process that involved solving complex mathematical problems which demanded substantial computational power. NVIDIA’s high-performance graphics cards, designed for gaming, proved to be exceptionally well-suited for cryptocurrency mining. Their ability to handle intricate calculations efficiently made them highly sought-after by miners. As demand soared, NVIDIA experienced a significant increase in sales, leading to shortages and price hikes.

Recognizing the lucrative potential of the cryptocurrency market, NVIDIA swiftly adapted its product line to cater to the specific needs of miners. They introduced new graphics cards optimized for mining, further fueling investor enthusiasm. At some point NVIDIA’s stock price surged by a remarkable 25% in just one month..

During this period, Intel, while a dominant player in the general-purpose microprocessor market, was less directly involved in the cryptocurrency mining boom. While their processors could be used for mining, they were not as well-suited as NVIDIA’s GPUs for the specialized tasks required. As a result, Intel’s share price did not experience the same dramatic growth as NVIDIA’s.

The Crypto Bubble and chip manufactures Pivot to AI

The cryptocurrency boom of the late 2010s was not without its risks. As the market reached unsustainable levels, a bubble formed, eventually leading to a significant crash. The decline in cryptocurrency mining activity had a direct impact on NVIDIA’s business, as demand for its mining-optimized GPUs plummeted.

However, NVIDIA was not caught off guard. Recognizing the unsustainable nature of the cryptocurrency market, the company had already begun diversifying its product line to reduce its reliance on mining-related revenue. One key area of focus was artificial intelligence (AI).

NVIDIA’s GPUs, with their parallel processing capabilities, were well-suited for the complex computations required for AI applications. The company invested heavily in developing AI-focused hardware and software, such as the Tesla line of GPUs and the CUDA platform.As AI gained traction in various industries, including data centers, autonomous vehicles, and healthcare, NVIDIA’s AI products became increasingly valuable. The company’s pivot to AI helped mitigate the negative impact of the cryptocurrency market downturn and positioned it for long-term growth.

Throughout the cryptocurrency boom and subsequent downturn, Intel continued to invest in improving its CPU technology. The company introduced new generations of processors with enhanced performance, power efficiency, and features. Intel’s CPUs remained dominant in the data center market, where they were used to power a wide range of applications, including cloud computing, enterprise software, and big data analytics.

While Intel did not experience the same level of growth as NVIDIA during the cryptocurrency craze, its position as a leading supplier of CPUs ensured a steady stream of revenue. The company’s focus on data centers, a rapidly growing market, positioned it for long-term success.

The Outsourcing Model: NVIDIA and TSMC

One of the key factors contributing to NVIDIA’s success has been its strategic decision to outsource the manufacturing of its chips to Taiwan Semiconductor Manufacturing Company (TSMC). TSMC is the world’s largest semiconductor foundry, specializing in contract manufacturing of integrated circuits.

By partnering with TSMC, NVIDIA has been able to focus on chip design and development, leveraging its expertise in graphics and AI technologies. TSMC, with its advanced manufacturing capabilities and economies of scale, can produce high-quality chips at a lower cost than if NVIDIA were to manufacture them in-house.

Geopolitical Tensions and Supply Chain Resilience

Now this is where geopolitics comes in to potentially gift Intel back its position as top dog. As tensions between China and Taiwan pose a significant threat to the global semiconductor supply chain. TSMC, a Taiwanese company, is a critical player in the manufacturing of advanced chips, including those used in NVIDIA’s products. If China were to invade Taiwan in its bid to “reunify China” as it has been so loud about of late, there is a risk of disruptions to TSMC’s operations or weaponization of TSMC position to hold the america at ransom (just like the US has done in recent time in their ongoing trade war), potentially leading to shortages of essential semiconductors.

To mitigate these risks, the United States government has been exploring ways to bolster its domestic semiconductor manufacturing capabilities. One key initiative is the CHIPS and Science Act, which provides significant financial incentives for companies to invest in semiconductor manufacturing facilities in the United States.

Intel, as a major American semiconductor manufacturing company, is well-positioned to benefit from these government initiatives. By expanding its manufacturing capacity in the United States, Intel can help reduce the country’s reliance on foreign suppliers and improve the resilience of the domestic semiconductor supply chain.

Additionally, the geopolitical tensions between China and Taiwan could provide an opportunity for Intel to increase its market share. If TSMC’s operations are disrupted, western companies may seek alternative suppliers, potentially leading to increased demand for Intel’s products.

However, it is important to note that building up domestic semiconductor manufacturing capabilities is a long-term endeavor. It requires significant investments, technological expertise, and a skilled workforce. Intel, along with other American semiconductor companies, will need to overcome significant challenges to achieve self-sufficiency in chip production in the future.

But as always I remain hope for the consumer, hopeful that it all ends well for them, but in the end we may never know.